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Brinker International Reports Third Quarter Results

The following excerpt is from the company's SEC filing.

DALLAS (April 19, 2016) – Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal third quarter ended March 23, 2016.

Highlights include the following:

Earnings per diluted share, excluding special items, increased 6.4 percent to $1.00 compared to $0.94 for the third quarter of fiscal 2015

On a GAAP basis, earnings per diluted share decreased 2.0 percent to $1.00 compared to $1.02 for the third quarter of fiscal 2015

Brinker International total revenues increased 5.2 percent to $824.6 million and company sales increased 5.7 percent to $805.1 million, primarily att ributable to the 103 restaurants acquired with the Pepper Dining transaction in the first quarter of fiscal 2016

Chili’s company-owned comparable restaurant sales decreased 4.1 percent

Maggiano’s comparable restaurant sales increased 0.2 percent

Chili's franchise comparable restaurant sales decreased 1.7 percent which includes a 2.2 percent and 0.7 percent decrease for U.S. and international franchise restaurants, respectively

Restaurant operating margin,

as a percent of company sales, declined approximately 150 basis points to 17.4 percent compared to 18.9 percent for the third quarter of fiscal 2015

For the first nine months of fiscal 2016, cash flows provided by operating activities were $299.6 million and capital expenditures totaled $76.1 million. Free cash flow

was approximately $223.5 million

The company repurchased approximately 2.6 million shares of its common stock for $126.1 million in the third quarter and a total of approximately 5.4 million shares for $266.2 million year-to-date

The company declared a dividend of 32 cents per share to be paid in the fourth quarter, representing a 14.3% increase over the prior year

“While we continue to deliver strong cash flow and positive earnings growth through the year, we are disappointed in our recent sales performance,” said Wyman Roberts, chief executive officer and president. “Our focus going forward is to more aggressively invest in our brands to grow comp sales and capture market share."

Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant Labor and Restaurant expenses. Restaurant operating margin is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. Restaurant operating margin is not a measurement determined in accordance with GAAP and should not be considered in isolation, or as an alternative, to operating income or other similarly titled measures of other companies.

Free cash flow is defined as cash flows provided by operating activities less capital expenditures.

Table 1: Q3 comparable restaurant sales

Company-owned, reported brands and franchise; percentage

Chili’s Company-Owned

Comparable Restaurant Sales

Pricing Impact

Mix-Shift

Traffic

Maggiano’s

Chili's Franchise

U.S. Comparable Restaurant Sales

International Comparable Restaurant Sales

Chili's Domestic

System-wide

Chili's company-owned comparable restaurant sales includes 103 Chili's restaurants acquired from a franchisee in the first quarter of fiscal 2016.

Reclassifications have been made between pricing impact, mix-shift and traffic in the prior year to conform with current year classification.

Revenues generated by franchisees are not included in revenues on the consolidated statements of comprehensive income; however, we generate royalty revenue and advertising fees based on franchisee revenues, where applicable. We believe including franchise comparable restaurant sales provides investors information regarding brand performance that is relevant to current operations and may impact future restaurant development.

Chili's Domestic comparable restaurant sales percentages are derived from sales generated by company-owned and franchise operated Chili's restaurants in the United States.

System-wide comparable restaurant sales are derived from sales generated by company-owned Chili’s and Maggiano’s restaurants in addition to the sales generated at franchise operated restaurants.

Quarterly Operating Performance

CHILI’S third quarter company sales increased 6.1 percent to $703.5 million from $662.9 million in the prior year primarily due to an increase in restaurant capacity resulting from the acquisition of 103 Chili's restaurants on June 25, 2015, partially offset by a decline in comparable restaurant sales. As compared to the prior year, Chili's restaurant operating margin

declined. Restaurant labor, as a percent of company sales, increased compared to the prior year due to higher wage rates, health insurance expenses and sales deleverage, partially offset by lower incentive bonus. Restaurant expenses, as a percent of company sales, increased due to sales deleverage and higher repairs and maintenance and rent expenses. Cost of sales, as a percent of company sales, increased slightly due to unfavorable menu item mix and commodity pricing primarily related to steak, produce and chicken, partially offset by increased menu pricing...


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